Earnings call transcript: Postal Realty Q2 2025 beats forecasts, stock rises

Postal Realty Trust Inc. (PSTL) reported strong financial results for the second quarter of 2025, surpassing analyst expectations in both earnings per share (EPS) and revenue. The company reported an EPS of $0.12, significantly above the forecasted $0.0677, representing a surprise of 77.25%. Revenue also exceeded expectations, reaching $22.73 million against a forecast of $20.62 million, marking a 10.23% surprise. The REIT, which offers an attractive 6.94% dividend yield and maintains a GOOD financial health score according to InvestingPro, saw its stock rise by 3.11%, closing at $13.97.

Key Takeaways

• Postal Realty’s Q2 2025 EPS and revenue exceeded forecasts with significant surprises.
• Stock price increased by 3.11% post-earnings announcement.
• The company raised its full-year 2025 AFFO guidance and plans to increase acquisitions.
• Strong performance driven by strategic property acquisitions and lease management.
• Postal Realty maintains a solid relationship with the United States Postal Service.

Company Performance

Postal Realty Trust has demonstrated robust performance in Q2 2025, driven by strategic acquisitions and efficient lease management. The company completed 127 property acquisitions year-to-date, including 68 in Q2 alone, amounting to over $60 million. This expansion strategy has been supported by a strong relationship with the United States Postal Service, a key tenant. The company’s focus on acquiring properties at accretive cap rates and executing long-term leases has bolstered its market position as a leader in postal real estate.

Financial Highlights

• Revenue: $22.73 million, up from the forecast of $20.62 million.
• EPS: $0.12, significantly above the forecast of $0.0677.
• Q2 2025 FFO: $0.35 per diluted share.
• Q2 2025 AFFO: $0.33 per diluted share.
• Net debt to annualized adjusted EBITDA improved to 5.1x.

Earnings vs. Forecast

Postal Realty’s Q2 2025 EPS of $0.12 exceeded the forecast of $0.0677 by 77.25%, while revenue of $22.73 million surpassed expectations by 10.23%. This performance marks a significant improvement over previous quarters, indicating strong operational execution and strategic growth initiatives.

Market Reaction

Following the earnings announcement, Postal Realty’s stock price rose by 3.11%, closing at $13.97. This increase reflects investor confidence in the company’s ability to deliver strong financial results and its strategic growth plans. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with a beta of 0.83 indicating lower volatility than the broader market. The stock’s performance is notable given its position within its 52-week range, with a high of $15.42 and a low of $12.26, and has delivered a total return of 12.98% year-to-date.

Outlook & Guidance

Postal Realty has raised its full-year 2025 AFFO guidance to $1.24-$1.26 per share, implying nearly 8% year-over-year growth. The company aims to target $90 million in acquisitions for 2025 and has updated its same-store cash NOI guidance to 7-9%. These projections underscore the company’s commitment to growth and operational efficiency.

Executive Commentary

CEO Andrew Spodak highlighted the company’s achievements, stating, "We have certainly accomplished quite a lot over the last one year and continue to make improvements to the business." Postmaster General David Steiner emphasized the importance of the Postal Service, saying, "The Postal Service is a crucial component of American democracy and infrastructure." CFO Rob Klein noted, "We continue to prioritize decreasing cash G&A as a percent of revenue."

Risks and Challenges

• Market saturation in postal real estate could limit growth opportunities.
• Macroeconomic pressures, including interest rate fluctuations, may impact financial performance.
• Dependence on the United States Postal Service poses a tenant concentration risk.
• Potential supply chain disruptions could affect property acquisition timelines.

Q&A

During the earnings call, analysts inquired about the company’s acquisition strategy and potential yield improvements. Management discussed efficiency gains achieved through their property management platform and highlighted improvements in same-store NOI driven by lower expenses and increased revenue.

Full transcript - Postal Realty Trust Inc (PSTL) Q2 2025:

Conference Operator: Greetings, and welcome to Postal Reality Trust second quarter twenty twenty five earnings call. At this time, all participants are in listen only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Jordan Cooperstein, Vice President of FP and A Capital Markets. Welcome, Jordan.

Jordan Cooperstein, Vice President of FP&A Capital Markets, Postal Realty Trust: Thank you, and good morning, everyone. Welcome to Postal Realty Trust’s Second Quarter twenty twenty five Earnings Conference Call. On the call today, we have Andrew Spodak, Chief Executive Officer Jeremy Garber, President and Interim Chief Financial Officer Robert Klein and Matt Bramwein, Chief Accounting Officer. Please note the company may use forward looking statements on this conference call, which are statements that are not historical facts and are considered forward looking. These forward looking statements are covered by the Safe Harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of risks and factors that are beyond the company’s control, including, but not limited to, those contained in the company’s latest 10 ks and its other regulatory filings. The company does not assume and specifically disclaims any obligation to update any forward looking statements, whether as a result of new information, future events or otherwise. Additionally, on this conference call, the company may refer to certain non GAAP financial measures such as funds from operations, adjusted funds from operations, adjusted EBITDA and net debt. You can find a tabular reconciliation of these non GAAP financial measures to the most currently comparable GAAP measures in the company’s earnings release and supplemental materials. With that, I will now turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust.

Andrew Spodak, Chief Executive Officer, Postal Realty Trust: Good morning and thank you for joining us today. The second quarter was one of our strongest quarters in large part due to the more efficient programmatic releasing effort with the Postal Service, which has now been in place for over a year. This refined approach provides enhanced visibility across our business and has enabled us to issue annual AFFO per share guidance for the first time, which we are updating today. I think it’s important for our shareholders to take stock of all that we have achieved since the start of 2024 in re leasing, maintaining a strong balance sheet and enhancing investor visibility. We started executing ten year leases in 2024.

And inclusive of executed leases and those agreed to through 2026, 31% of leases in the portfolio are subject to ten year terms, and 55% have annual rent escalations. As stated in our last call, 2025 expirations have all been agreed upon and are being executed prior to lease expiration. We have agreed to rent with the Postal Service on the new leases for the 2026 expirations, and we are in discussions on the 2027 expirations as well. We have continued to grow while always being mindful of our balance sheet. We have displayed we can prudently and opportunistically source equity, having issued over 50,000,000 through our ATM and operating partnership units since the beginning of 2024.

Additionally, we sold two assets assets in 2024 at a sub-five percent cap rate for over $6,000,000 in order to redeploy the proceeds into higher yielding assets. All of these efforts have allowed us to provide further clarity to the investor community about our earnings power through AFFO and same store NOI guidance. We have certainly accomplished quite a lot over the last one years point and continue to make improvements to the business and provide our investors with a clear picture of where Postal Realty is going over the next few years. Now shifting back to the 2025. We delivered AFFO per share of $0.33 coming in ahead of our expectations for the first half of the year.

This has enabled us to increase full year 2025 AFFO guidance range by $04 to $1.24 to $1.26 per share. The midpoint of our updated guidance range now implies nearly 8% year over year growth, in line with the 6% to 8.5% AFFO per share growth Postal Realty has delivered over the past few years. This updated guidance takes into account any costs related to the CFO transition. Turning to acquisitions. We have closed on 127 properties year to date for over $60,000,000 inclusive of $6,000,000 of transactions completed with operating partnership units.

We are pleased with the opportunities we are seeing and our progress to date, which has us trending towards meeting or exceeding $90,000,000 for the year. In Q2, we completed 36,000,000 of acquisitions at a 7.8% weighted average cap rate, all while being able to decrease leverage with net debt to annualized adjusted EBITDA now at 5.1 times, down from 5.2 times at the 2024. We will remain focused on these key metrics as we acquire additional properties throughout the rest of the year. Our acquisitions have and will continue to be a critical part of long term value creation. Our purchases are accretive at the going in cap rate and they stabilize at significantly higher yields as we operate them more efficiently and run through our programmatic releasing approach.

We continue to have success marking rents to market, incorporating annual rent escalations in new leases and achieving operating efficiencies. As a result, we are updating our 2025 same store cash NOI guidance to be between 79%, up from our prior guidance of between 46%. Our robust re leasing program continues to be a significant driver of the high single digit earnings growth and visibility at the company. Since our last earnings call, David Steiner was appointed and has now begun his tenure as the new Postmaster General of the Postal Service. Mr.

Steiner joins with a background in logistics, serving as President and CEO of Waste Management for numerous years and on the Board of Directors at FedEx Corporation. In a recent letter to employees, he assured all stakeholders that the strength of the Postal Service resides in their structure as a self financing independent entity and he stated that he believes the Postal Service is a crucial component of American democracy and infrastructure providing essential services to every business and home with its primary mission to bind the nation together. We encouraged by and aligned with his statements and look forward to continuing to work closely and efficiently with the Postal Service under the new Postmaster General. We remain confident in the value of our portfolio to the Postal Service’s mission, the security and visibility of our cash flows and our ability to generate strong internal growth and to source and acquire new assets accretively as we consolidate this highly fragmented market. Before passing off to Jeremy, I’d like to take some time to thank Rob Klein for all his efforts during his tenure, including positioning us with a strong balance sheet for growth and assembling a high performing accounting and finance team.

We wish him the best of luck in his new role. Thank you, Andrew. As we shared in prior calls, rents for all leases set to expire in 2025 and 2026 have been agreed upon and our re leasing tempo from last quarter has not slowed down as we are executing 2025 leases prior to expiration. We are actively negotiating 2027 rents with the Postal Service and have agreed to similar terms for expirations from 2023 through 2026 with the inclusion of 3% annual rent escalations and a mix of ten year leases. For illustration, if the 2027 leases were all executed today, we project that north of 60% of the portfolio would contain annual rent escalations.

As of last week, we are caught up on all of our leases in the portfolio and have no leases in holdover. Due to the execution of new leases during the second quarter, the company received a total lump sum catch up payment of $192,000 We are expecting to receive a total lump sum catch up payment for around $300,000 in the third quarter. This anticipated payment was factored into our AFFO per share guidance. Aside from prospective acquisitions that are acquired and holdover status, lump sum catch up payments should continue to diminish in frequency and value as we sign leases ahead of their expiration dates. As Andrew mentioned, in the 2025, we acquired 68 properties for approximately $36,000,000 at a 7.8% weighted average cap rate, which added approximately 240,000 net leasable interior square feet to our portfolio, inclusive of 43,000 square feet from 32 last mile post offices and 197,000 square feet from 36 flex properties.

Subsequent to quarter end and through July 18, we acquired 23 properties for approximately $8,000,000 and placed an additional 24 properties totaling $7,000,000 under definitive contracts. I’ll now turn the call over to Rob to discuss our second quarter financial results.

Rob Klein, Interim Chief Financial Officer, Postal Realty Trust: Thank you, Jeremy, and thank you everyone for joining us for today’s call. During the second quarter, we delivered funds from operations or FFO of $0.35 and adjusted funds from operations or AFFO of $0.33 per diluted share. Thanks to our re leasing successes over the past years, the bottom line impact from contractual rent escalations is projected to result in $02 of AFFO per share in 2025. As Andrew stated, we are updating our 2025 AFFO guidance range to $1.24 to $1.26 per share due to outperforming our initial expectations for the first half of the year. The increased guidance range is due to lower than anticipated operating expenses in the 2025 due to quarterly variability related to the scope and timing of projects and lower recurring CapEx from completing jobs more cost effectively.

We have maintained low leverage and minimized our exposure to variable rate debt. At the end of the second quarter, our debt outstanding had a weighted average interest rate of 4.5%. The company’s $150,000,000 senior unsecured revolving credit facility had $46,000,000 outstanding and fixed rate debt comprised 86% of all borrowers. Net debt to annualized adjusted EBITDA decreased quarter over quarter to 5.1 times, well within our target of below seven times. During the second quarter and subsequent to quarter end, we raised nearly $18,000,000 of equity issuing over 867,000 shares of common stock through our ATM offering program at an average price of $14.79 per share and approximately 392,000 common units in our operating partnership as part of consideration for property acquisitions.

Recurring CapEx in Q2 was $127,000 slightly lower than our guidance range for the quarter due to the timing of projects. Looking forward to Q3, we anticipate some projects that carried over from Q2 to complete and the figure to be between $175,000 and $325,000 Based on one time costs associated with the CFO transition, we now expect total cash G and A expense to be between 10,500,000.0 and $11,500,000 for the full year 2025. We continue to prioritize decreasing cash G and A as a percent of revenue on an annual basis. Our Board of Directors has approved a quarterly dividend of $0.2425 per share representing a 1% increase from Q2 twenty twenty four’s dividend and remains well covered by AFFO. Postal Realty continues to strengthen its position as the market leader in the postal real estate space, executing its business plan of acquiring new assets and improving the cash flow.

On a personal note, I’m grateful for the past four and a half years of Postal Realty. We have achieved tremendous growth, built an amazingly capable team and continuously enhanced our transparency to the market. It has been a pleasure working with the folks at Postal Realty, the research analysts, investors and everyone else who supports us as well. I look forward to staying in touch. Thank you.

This concludes our prepared remarks. Operator, we’d like to open the call for questions.

Conference Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

At this time, we will pause momentarily to assemble our roster. First question comes from Kyle Bonci from Curist. Please go ahead.

Rob Klein, Interim Chief Financial Officer, Postal Realty Trust: Thanks. Good morning. Can you just walk us through the pickup in the same store NOI guidance and what’s ahead of pace relative to prior expectations? Store NOI has a few components to it. There’s the revenue component, which we’ve talked about pretty extensively, which has been some of our releasing efforts and our successes along those lines.

And then the other component, obviously, is the expense, the two together combining to create NOI. As we showed in our earnings and we talked about a bit, expenses were down in the first couple of quarters of the year versus our projections. And that’s led to an increase in same store NOI in addition to some revenue exceeding expectations. So I think it’s really the combination of the two, that’s why we revised the guidance to give you a better flavor of how the remainder of the year may look. Got you.

And in terms of the guidance, it seems like there’s a fairly steep step down from the $0.33 in the second quarter. And it looks like there’s going to be some higher CapEx and also offset by some catch up payments in the third quarter. So just curious what’s driving the step down in the run rate?

Andrew Spodak, Chief Executive Officer, Postal Realty Trust: Sure. As we shared on the call, our OpEx is going to be variable depending on the scope and timing of projects. We’re vigilant in managing these properties as cost effective and efficiently as possible. We have a network of national vendors and manufacturers that we’ve been engaged with over the past twenty plus years. I think it’s important to note that this is not a quarterly business.

So our annual budgeting and forecasting is informed by historical expenses and historical NOI margins, which have trended in the 77% to 82% range, and we expect our NOI margins to remain within that range for the remainder of the year.

Rob Klein, Interim Chief Financial Officer, Postal Realty Trust: Understood. Thank you, guys.

Conference Operator: Thank you. The next question comes from Nehal Tazpaski from JPMorgan. Please go ahead.

Nehal Tazpaski, Analyst, JPMorgan: Good morning, guys. I just have just one question for me today. I guess, on the acquisition front, you guys mentioned you’ve been capturing yields in the high 7s, but it sounds like from Andrew’s comments that the sort of stabilized yield, I guess, once you guys get in the property is a little higher than that. Could you guys talk about, I guess, the efficiencies you guys are putting into these properties and I guess where that sort of stable yield is?

Andrew Spodak, Chief Executive Officer, Postal Realty Trust: Sure. I appreciate the question. So yes, as we’ve stated, we’ve been actively acquiring at or above a 7.5 cap rate, which we’ve shown, and we will continue to do that. And while these properties are accretive out of the gate, we’re gaining a lot of efficiencies just in our management platform. And then as we bring it into our platform through the economies of scale that we’re getting through the management of 2,000 buildings.

Then we have the opportunity when the leases roll to mark them to market and put them through our programmatic leasing process, which we’ve shown has yielded great success, both from an efficiency standpoint as well as from a same store. That’s why we’ve adjusted our guidance and are now in the 7% to 9% for the same store cash NOI.

Nehal Tazpaski, Analyst, JPMorgan: Got it. Okay. Thank you.

Andrew Spodak, Chief Executive Officer, Postal Realty Trust: Thank you.

Conference Operator: Thank you. To ask a question, you may press star then one on your touch tone phone. Again, if you have a question, please press star and 1. This concludes our question and answer session. I would like to turn the conference back to Andrew Spodek for closing remarks.

Andrew Spodak, Chief Executive Officer, Postal Realty Trust: On behalf of the entire team, we thank you all for your continued support and for taking the time to join us today. Have a great day.

Conference Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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